Costello reveals 'welfare to work' measures

The centrepiece of the Budget is a $3.6 billion package aimed at moving tens of thousands of people off welfare and into work.

The Federal Government believes too many Australians are relying on welfare and is using the Budget to try to reverse the trend by making more single parents and disability pensioners look for work.

As expected, the much-mooted 'welfare into work' package formed a centrepiece of Treasurer Peter Costello's 10th Budget.

"If more people are able to move from welfare to work then this will help them with higher incomes and better participation in mainstream economic life," Mr Costello said.

"It will also reduce the obligation on other taxpayers whose taxes pay for the welfare support."

Under the measures, single parents receiving the Parenting Payment will be expected to look for at least part-time work once their youngest child turns six and is ready for school.

And the Government will cut the Disability Support Pension for anyone capable of working more than 15 hours a week at award wages.

Instead, they will move onto the Newstart allowance and have to look for work.

The move is particularly targeted at people with bad backs, who the Government says may not be able to perform manual labour but could perform non-manual jobs.

Mr Costello says 6.5 per cent of the work force is on the Disability Support Pension, many of them because there is no requirement to look for work. He added: "6.5 per cent of the work force is not disabled."

But wary of a "scare campaign", the Government has quarantined the existing 700,000 disability pensioners from the changes.

"The object of these changes is to protect the genuinely disabled but to encourage those capable of part-time work to look for it," Mr Costello said.

The measures are to kick in from July next year, with Mr Costello saying they should see 190,000 extra Australians move into jobs by 2008-09.

Carrot and stick

As an incentive, the 17 cent tax rate drops to 15 cents and the rate at which part-time workers lose their welfare entitlements when they earn more at work will drop.

"Instead of 70 cents in the dollar withdrawal it will be 60 cents after they have earned $250 per fortnight," Mr Costello said.

Mr Costello says the Government will spend more than $2 billion on services to help the groups find work over the next four years, more than the changes will save in welfare payments.

The money will be spent on rehabilitation programs and vocational education and training.

The Treasurer says child care has been "massively increased" to help cope with the added demand, including 80,000 new places in outside-school-hours care.

Mr Costello says that while the 'welfare into work' measures will cost money in the short-term, the Government expects to break even after eight years and then they will start saving money "down the line".

Along with the financial incentives come tougher penalties.

From July 1 next year, a job-seeker who does not meet requirements will have the payments suspended until they meet their obligations.

Repeated breaches will result in an eight-week suspension.

Despite some pre-Budget speculation to the contrary, decisions about penalties will remain with Centrelink.